The Hollywood tax wars: It’s on

posted at 4:01 pm on February 25, 2014 by Erika Johnsen

As Ed described last week, the House of Cards producers recently served the state of Maryland with their demands for more sweet cash monies in the form of state taxpayer subsidies — despite the almost $40 million worth of subsidies the show has already received and their rather dubious job-creation claims. Maryland is hardly the only state on the receiving end of that kind of pressure from the entertainment industry, either; Watchdog.org reports that Florida’s production industry is currently lobbying lawmakers for a whopping $1 billion in various tax perks, and the pros of all of that largesse aren’t at all clear:

The giveaways, or subsidies, allow for selected companies producing films, commercials, music videos, “high-impact” television shows and interactive websites to skip out on as much as 30 percent of their tax bills as long as they’re working in Florida.

Everyone else will pick up the difference, Matthew Mitchell, senior research fellow at the Mercatus Center at George Mason University, told Watchdog.org.

“The vast majority of evidence suggests these are not schemes that raise more revenue than they lose,” Mitchell said. “Clearly, the taxpayer loses.” …

“Even if a state economic development office can track the number of jobs it created, it’s not effective at discovering how much higher prices are that consumers will have to pay, how much higher taxes are for consumers to pay the difference or how much economic exchange didn’t take place because of those higher taxes and prices,” Mitchell said. …

From 2003 to 2010, the Florida legislature dished out about $73 million in tax credit to the entertainment industry, but between 2010 and 2013, that price tag shot up to $296 million — and industry reps are now pushing for a solid $1 billion by 2020.

This is all part of a growing pattern of states awarding generous benefits to a conspicuously glitzy industry; over the past decade and change, California has been losing entertainment industry jobs to states that can offer up the biggest tax boons — and California is looking to get back in the game, via Politico:

Tired of seeing other states pony up big cash to attract television shows, movies and jobs, California is looking to boost its own tax breaks for entertainment projects.

Democratic state Assemblyman Raul Bocanegra plans to introduce legislation in February to increase California’s $100 million-a-year budget for film and TV tax incentives and expand the type of productions able to claim tax credits to big-budget films and network shows, which are now excluded.

It may seem ironic that the home of Hollywood needs to persuade studios to shoot in the state, but budget-tightening in the past decade has led to a system where nearly all location decisions are based on how much cash states dangle before production companies. …

“California is now just trying to recover the loss that was created by this tax war,” said Paul Audley, the president of Film L.A., a firm that helps studios secure permits. “California is really just trying to restore its signature industry against an onslaught of free money from other states.”

I understand that production companies are businesses just like any other, and they are rationally responding to the incentives that more than 40 states now seem to think it’s a good idea to offer them in this escalating tax-break battle — but I must say, I find it rather irritating that these Hollywood liberals can apparently recognize the (in their case, questionable) trickle-down economic benefits of lower taxes in their industry, but they content themselves with grabbing crazy tax breaks for themselves while generally continuing to use their hefty bank accounts to campaign for the Democrats that push for higher taxes for everybody else. I thought progressives just loved taxes — levying them, paying them, increasing them in order to subsequently redistribute them — so why are these guys using their glamorous clout to avoid contributing their share of them? Weird, isn’t it?

I thought progressives just loved taxes — levying them, paying them, increasing them in order to subsequently redistribute them — so why are these guys using their glamorous clout to avoid contributing their share of them?

They love levying them on their enemies, the middle class (who they regard as being Republican).

Georgia has one of the finest film industries in the States. Come to Ga! Spend your money and we will save you some. ; )

Bmore on February 25, 2014 at 4:10 PM

And, apparently, Georgia has more than its fair share of zombies.

When I was living in MI, they had an aggressive program to provide tax credits. There was never any proof that they millions in tax credits helped the taxpayers. Being told that part of the benefit was “tourism” related when people saw the state would have worked better if the tax credits went to productions that represented themselves as being in MI and not some other place/planet/whatever.

I understand that production companies are businesses just like any other, and they are rationally responding to the incentives that more than 40 states now seem to think it’s a good idea to offer them in this escalating tax-break battle — but I must say, I find it rather irritating that these Hollywood liberals can apparently recognize the (in their case, questionable) trickle-down economic benefits of lower taxes in their industry, but they content themselves with grabbing crazy tax breaks for themselves while generally continuing to use their hefty bank accounts to campaign for the Democrats that push for higher taxes for everybody else. I thought progressives just loved taxes — levying them, paying them, increasing them in order to subsequently redistribute them — so why are these guys using their glamorous clout to avoid contributing their share of them? Weird, isn’t it?

Cronyism?

It’s far worse than that…it’s little more than hypocrisy. The embracing of the ‘all are equal, and some are more equal than others’ fallacy that is SOP with the totalitarians of the left.

In California, effective 12/31/13, Enterprise zones – a limited number of specific geographic areas which offered special tax rates for businesses to encourage the development of businesses, the retention of businesses, and greater employment were eliminated because of the state’s budget challenges.

Now the Hollywood lobby is demanding the state provide them with tax breaks and tax incentives even though other industries and geographical areas lost theirs – and the state still haves massive debt and unfunded obligations challenges.

If it weren’t for double standards, they’d have no standards whatsoever.

A lower tax rate is not a subsidy. IT is a governmental entity allowing someone to keep more of the $$ they have earned by them agreeing to steal less & not more.
That aside, what I think is interesting is that clearly there are Progressives who recognize the fact that taxes cripple,hinder, business.

LOS ANGELES (MarketWatch) — In its debut quarterly report after going public in December, AMC Entertainment Holdings Inc. AMC +0.36% on Tuesday reported fourth-quarter net income of $279.62 million, or $3.58 a share, compared with $373,000, or zero cents a share, for the same period a year ago. Profits included a one-time gain from a deferred tax asset, accounting for $3.40 of its earnings, and putting it in line with the 18-cent average estimate from analysts polled by FactSet. The Leawood, Kan.-based theater chain posted revenue of $712.98 million against last year’s $696.99 million, and well ahead of the FactSet forecast of $697.8 million. Shares ended the regular session up marginally to $22.47.

If nothing else, Dave Camp’s big tax reform plan will highlight the terrible, unforced error that is the US tax code. By lowering marginal tax rates, compressing tax brackets, and eliminating or trimming many economically inefficient tax breaks, the blueprint would — according to The Wall Street Journal’s review of Joint Committee on Taxation analysis — boost real economic growth by as much as 1.5% to 1.6% a year over the 2014-2023 period and create nearly 2 million more private sector jobs.

None of this fits the agenda or vision of the Obama Administration, or the progressive statists. As Hollywood demonstrates, they deserve a tax break / incentives, and others do not. Doing something across the board, and it will be seen as ‘unfair’…yet, this one industry deserves special treatments.

Any jobs that are “created” are only short term temp jobs for the production companies and usually only temporary staffing or hours increases for businesses that are working with them. As a local production house, I can tell you that anytime a “big Hollywood outfit” comes to town if they call me the first thing they ask is what I will “give” them?

Tired of seeing other states pony up big cash to attract television shows, movies and jobs, California is looking to boost its own tax breaks for entertainment projects.

How about Republicans learn to embrace (certain) tax increases? A nice VAT on the film industry by the federal government the next time the GOP is in power, to offset the tax breaks that the Democrats in Sacramento give to their doners.

A lower tax rate is not a subsidy. IT is a governmental entity allowing someone to keep more of the $$ they have earned by them agreeing to steal less & not more.
That aside, what I think is interesting is that clearly there are Progressives who recognize the fact that taxes cripple,hinder, business.

Badger40 on February 25, 2014 at 4:43 PM

We are too far down that path to ever go back. In fact the progs believe that a failure to tax something at all, -is a subsidy. Since conservatives don’t get to set the political vocabulary we have to accept it. We can however force them to be consistent.